By Anita Inder Singh

The Sino-Indian Great Game in Iran: Why China has the Advantage

US President Donald Trump’s decision to
grant exemptions from sanctions to India, China and six other countries
importing Iranian oil reveals how the quest for energy security, enhanced
connectivity and economic progress are intertwined with strategy in the Sino-Indian
Great Game in Iran.

China and India are the world’s top oil
buyers and Iran’s top two customers. They are also Asia’s largest rivals and
have a long-standing border dispute. India and the US have a strategic
partnership; China and the US perceive each other as security threats.

The competition between India and China
stretches beyond their contested frontier, especially as China extends its
political, economic and military influence into the Indian Ocean. Their rivalry
extends to Iran.

In fact, Iran is why both are affected by the
Trump administration’s National Security Strategy 2017. That document calls for
America’s “energy dominance” — which is unrealistic in an interdependent world
having energy markets which are interconnected to one another. India, for
instance, is dependent on both the US and Iran for many of its needs. And the
US is indebted to China to the tune of USD
1.2 trillion.

Iran’s geopolitical location highlights
its strategic importance to China and India. At the center of the Middle East, its
neighbors are Afghanistan and Pakistan in South Asia, Turkmenistan in Central
Asia, Iraq and Turkey in West Asia, and Armenia and Azerbaijan in the South
Caucasian part of Europe (both are members of the Council of Europe and the Organization
for Security and Co-operation in Europe). The Strait of Hormuz, that crucial
conduit, links Iran westwards to the Persian Gulf and Europe, and eastwards to
the Gulf of Oman, South and East Asia.

Moreover, Iran’s geography enables it to
connect the energy networks of countries which are on the route of China’s Belt
and Road Initiative (BRI). They include Turkey, Turkmenistan and Pakistan.

Advantage
China: Diplomacy, Economics and Connectivity

The connections of both Iran and China with
Central Asia increases their potential to cooperate within the framework of the
BRI. China is the top investor in, and builder of, supply networks in Central
Asia.

China is the world’s largest energy buyer;
Iran is a major oil producer. China imports oil from several Middle Eastern
countries. But Iran is the only one that supplies it with oil and gas by both
land and sea.

China and Iran on one side, and the US on
the other, are mutually hostile. India and the US are strategic partners. India
is opposed to the militarization of Iran’s nuclear program and joined the
international sanctions imposed on Iran between July 31, 2006 and January 16, 2016.
China, which helped to develop Iran’s nuclear program and trained its nuclear
scientists, defied those sanctions and will disobey Trump’s call for new
sanctions.

Initially, New Delhi said it would not comply
with America’s unilateral sanctions. Understandably. But the State Bank of
India informed refiners in June 2018 that it would not handle payments for
Iranian crude when the sanctions came into force in November. The result? Even
before the sanctions “officially” started on November 4, 2018, Indian oil
imports from Iran fell sharply. That was bad news for Teheran. For India is Iran’s
second-biggest oil buyer behind China.

China’s refusal to obey Trump’s sanctions
put the spotlight on Iran’s dependence on China, and its diplomatic edge in
Iran.

China has strengthened its position in
Iran over three decades. It has bought Iran’s oil, sold Iran arms, and made
huge investments there. While the international sanctions were in force,
China’s support saved Iran from international pariah status for a decade. Even
in the future, as a permanent member of the United Nations (UN) Security
Council with veto power, China could be of great strategic help for Iran when
it comes to vetoing any proposal against Iran in the UN.

Trump’s sanctions will only push China and
Iran closer. On August 3, 2018, Iran’s foreign minister, Mohammad Javad Zarif,
said that China was pivotal to salvaging the multilateral nuclear agreement which
ended the UN sanctions against his country. Now, with Trump’s unilateral
sanctions in place, China will probably buy much of the Iranian oil that other
countries won’t because of the latest American sanctions.

Both countries will benefit from this. Since
2012, Iran has accepted the Chinese yuan for its crude exports to Beijing. This practice
could increase because of America’s withdrawal from the 2015
Iran nuclear agreement and its imposition of new sanctions against
Iran. That would not be to Washington’s liking.

When it comes to connectivity, China is
also in the lead. Tehran hopes to promote Sino-Iranian trade and turn Iran into
a major Eurasian trade hub. And China can help.

Iran joined the BRI in January 2016, when President
Xi Jinping became the first foreign leader to visit the country after the
international sanctions were lifted.

In mid-February 2016, the first train — the
Silk Road Train — arrived from China to Teheran. It started from Yiwu
city in eastern China’s Zhejiang Province, lying to the south of Shanghai, and
carried Chinese goods. The train passed through Kazakhstan and Turkmenistan and
completed its journey in a fortnight. Until then, it took 45 days to sail from
Shanghai to Iran’s Bandar Abbas port, which is on the on the Strait of Hormuz.
Significantly, Bandar Abbas is also Iran’s main naval base.

For Iran, the Chinese-built railway line
and train opened a new trade link as it emerged from years of economic
isolation.

Since
international sanctions were lifted in 2016, Iran has shown, in just three
years, how quickly the rivalry between India and China can expand as both seek
to enhance their regional and international clout. To counter China,
US-friendly India will try to strengthen its ties with US-hostile Iran.

The train’s route via Kazakhstan and
Turkmenistan is also of significance for strategic “connectivity”. Located
between East Asia and Western Europe, Central Asia will be the key to the
success of the BRI.

The importance of Kazakhstan cannot be
overstressed. It is one of three Central Asian countries (the other two are
Turkmenistan and Uzbekistan) sharing a border with China. It was in Kazakhstan
that Xi announced the BRI on September 7, 2013.

China’s search for energy has also led it
to cultivate energy-rich Turkmenistan for supplies. A few days before Xi
presented his vision of the BRI in Astana, China and Turkmenistan created, on September
2, 2013, a strategic partnership. Gradually, energy cooperation between the two
countries was strengthened. China became the largest trading partner and
largest natural gas market for Turkmenistan.

Turkmenistan also has road and rail links
with Iran. So, together with Iran, China has crafted economic strategies and tried
to improve road and rail networks to Central Asia. Xi sees such supply routes
further linking the Pacific Ocean to the Baltic Sea, and gradually connecting East,
West and South Asia. World trade and investment — passing through Chinese and
Iranian hands — would thus be facilitated.

With its hunt for energy in Iran and
Central Asia well under way, in May 2018 China boldly responded to Trump’s
announcement of sanctions by defiantly presenting news of another train service
to Iran. Shortening travel time again, the new train starts from Bayannur city
in northern China’s Inner Mongolia Autonomous Region to Tehran. Iran and China
see their new railway as helping to increase domestic consumption and facilitating
the export of their products to European markets.

Between 2006 and 2016, China benefited by defying the international sanctions.
The nervous withdrawal of Western and Indian companies from Iran opened a wide
door to Chinese companies, which gained a stable foothold there. That was
advantageous to both countries. Iran-China trade was worth USD 51.8 billion in
2014, according to official Chinese statistics — a big increase from around USD
4 billion in 2003. During President Xi Jinping ‘s visit to Iran in 2018, the
two countries agreed to increase trade to USD 600 billion over the next decade.

India
Tries to Counter China

India lost ground to China by going along
with the international sanctions on Iran. Now, with China establishing its
influence in the Indian Ocean, attempts by Beijing and New Delhi to increase
their clout in Teheran augur an increase in the China-India regional competition.

On the security front, India’s cooperation
with Iran has to be seen against the broader context of its regional rivalries
with Pakistan and China.

India has long opposed Iran’s alleged
efforts to acquire nuclear weapons capability. A nuclear-armed Iran would upset
the balance of power across West and Central Asia. This would adversely impact India’s
economic and strategic interests. It is unclear how Iran might react to
Pakistan’s extremist training and exports across West, Central and South Asia.
At the same time, however, friendly ties with Iran would enhance India’s influence
in West and Central Asia. India hopes that an amicable relationship could help
counter China in Iran and West Asia.

The
Significance of Chabahar Port

With the intent of increasing its clout in
Iran, New Delhi signed, in 2002, an agreement with Teheran to develop the
strategically-located port of Chabahar on the Gulf of Oman. But it was only in
2016 — after the lifting of international sanctions on Iran — that work on the
port gained impetus.

Chabahar is Iran’s sole Indian Ocean port.
Iran itself is keenly interested in the construction of the port. The sanctions
had left Chabahar undeveloped and poorly funded. Control over Chabahar could
put the ace card in Teheran’s hands as it deals with the competition between
China, India, and Russia in South and Central Asia.

India’s interest in building the port
reflects its need to counter China’s China-Pakistan Economic Corridor, which is
a vital milestone on the BRI. Sino-Indian competition in the Arabian Sea has
sharpened since 2013, when Pakistan gave China control over Gwadar port. For
China, Gwadar is an outlet to the Indian Ocean. Gwadar has given China a
permanent vantage point in the Indian Ocean and the Persian Gulf. It could
become a Chinese military base.

The spectre of “China” has loomed large
over Chabahar. Beijing offered investment to build the port. But India clinched
the deal. India and Iran signed their Memorandum of Understanding in May 2015
to construct Chabahar port.

India’s development of Chabahar suits
Iran. Tehran’s concern that China’s Gwadar project in Pakistan would weaken
Iran’s position as the entrance to Central Asia led it to develop Chabahar with
India’s help.

Situated in southern Iran and lying just outside
the Persian Gulf, Chabahar could become India’s door to trade with Afghanistan
and Central Asian countries. In fact, India shipped its first consignment
of wheat to Afghanistan in December 2017 via Chabahar.

Iran has not ruled out a Chinese role in
developing Chabahar. Teheran would be open to Chinese and Pakistani investment
to speed up the Chabahar project.

If India’s ties with Iran are dented because
it goes along with American sanctions, the country that will gain the most is
China. This prospect does worry the US. That is why Washington has additionally
granted India relief from certain sanctions so that it can continue to develop
the port. It would not like China to replace India in Chabahar.

Outlook

Generally, India’s influence in Iran and
in the Indian Ocean area will hinge on how much cash it can provide, and on its
efficiency in completing projects. More investment by India’s friends like Japan,
the US and the European Union in the Middle East could also help balance China’s
economic power, which in turn is contributing to its growing military footprint
in the Indian Ocean region.

The rivalry between India and China will
prevail. They cooperate on many regional issues and in organizations, including
the BRICS New Development Bank, the China-sponsored Asian Infrastructure
Investment Bank and the Shanghai Cooperation Organization. The mix of rivalry
and collaboration helps both to maximize their diplomatic and economic options.
That is normal. Parallel or cross-cutting linkages define relations between
states.

Iran will remain the well-connected
playground for the Sino-Indian Great Game in South Asia, the Middle East and
Central Asia. Since international sanctions were lifted in 2016, Iran has
shown, in just three years, how quickly the rivalry between India and China can
expand as both seek to enhance their regional and international clout. To
counter China, US-friendly India will try to strengthen its ties with
US-hostile Iran. (Interdependence again?)

The Great Game between China and India in
Iran is going to be played for many years. Strategically and economically useful
to both India and China, Iran will remain a major power-broker in the Indian
Ocean area, the Middle East and Central Asia.

About The Author

Anita Inder Singh, a Swedish citizen, is a Founding Professor of the Centre for Peace and Conflict Resolution in New Delhi. She has been a Fellow at the National Endowment for Democracy in Washington DC and has taught international relations at the graduate level at Oxford and the LSE. She has written for the OSCE Office for Democratic Institutions and Human Rights and the UN Department of Economic and Social Affairs.